The Fed
is waiting for the totality of the data to be released before deciding what to
do at their September meeting. As of now, the data supports the soft-landing
narrative as the disinflation in the core measures
continues but the strength in the labour market and consumer spending might
keep inflation higher for longer. This is something that might translate into
more rate hikes or a “higher for longer-er” stance. Recently the long-term
Treasury yields have been rising non-stop and this has benefited the US Dollar
but the reason for such a rally is still unclear.
On the other hand, the BoJ kept everything unchanged as expected but implicitly tweaked
the YCC policy keeping the target band unchanged but giving more flexibility
with a hard cap at 1.00%. So, they basically widened the YCC band without
stating it explicitly. This has created lots of volatility in the JPY, but
eventually led to a fast depreciation. The BoJ has also already intervened
twice to smooth the rise in yields ultimately weighing on the JPY. Today, the Japanese CPI data surprised to the upside with
the core-core reading rising further.
USDJPY Technical Analysis –
Daily Timeframe
USDJPY Daily
On the daily chart, we can see
that USDJPY broke above the previous high at the 145.00 handle and the breakout
might point to a rally towards the 150.00 level. We recently retested the resistance turned support and what
happens next will decide if we go higher or lower as a fall back below the
145.00 handle should point to a deeper pullback. Note also that the
145.00-150.00 range is considered the “intervention territory” for the BoJ.
USDJPY Technical Analysis –
4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can see that the price
recently fell below the red 21 moving average which
was acting as a great dynamic support. Maybe it’s an early sign of reversal? If
the price falls below the 145.00 handle, the sellers should start to look
forward to it and take the price into the 142.00 handle. We can also notice
that we’ve been diverging with the
MACD and this
is generally a sign of weakening momentum often followed by pullbacks or
reversals.
USDJPY Technical Analysis –
1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, we can see that the
price has bounced near the 145.00 support and
it’s now approaching a strong short-term resistance around the 145.60 level
where we have the confluence with
the previous swing low level, the 38.2% Fibonacci
retracement level and the red 21 moving average. We
can expect the sellers piling in here with a defined risk above the resistance
and target the 142.00 handle. The buyers, on the other hand, will need the
price to break above the resistance to pile in and extend the rally towards new
highs.